BSkyB reports major leap in profits

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The Independent Online

BSkyB today reported a 40 per cent leap in first quarter profits as it said strong demand from new customers for high definition viewing helped offset higher numbers of customers quitting the group.

The broadcasting giant reported pre-tax profits of £180 million up from £129 million a year earlier.

It also posted better-than-expected net customer additions - those joining the group less those leaving - of 94,000 in the three months to September 30.

But its rate of customer churn, measuring customers leaving Sky, rose to 11.3 per cent from 9.9 per cent in the previous quarter after it hiked direct-to-home subscriptions and was more cautious about customers in arrears.

It also said moves to switch seven million viewing cards as part of routine security efforts had affected customer retention.





Sky said the card switch-over prompted some customers to reconsider their options and quit the service.

It reported another 287,000 Sky +HD net customers joining the group in the quarter, up threefold on a year ago as it continued to benefit from slashing the cost of an HD box from £150 to £49 earlier this year.



Marketing costs rose by £37 million to £245 million, reflecting the investment in HD.



Sky said it was adding another HD channel soon to take the total number to 35 as it put faith in demand for HD strengthening further despite an ongoing tough consumer environment.



Overall revenues rose 10 per cent to £1.38 billion in the first quarter, while operating profits increased by 9 per cent to £198 million.



It held administrative costs flat year-on-year, which helped boost earnings and counteract the money being pumped into HD.



Jeremy Darroch, chief executive of BSkyB, said: "Our business has made a good start to our 2010 financial year with another quarter of strong results.



"In what continues to be a tough economic environment, we have increased the number of customers joining Sky."



Its tougher stance on customers falling into arrears - including restricting repayment methods - has seen levels of bad debts fall year-on-year, according to Sky.



On a corporate level, the group is facing criticism from the Association of British Insurers (ABI) over its performance targets for executive bonuses.



The ABI has called on shareholders to vote against the remuneration report at today's annual shareholder meeting after giving it an "amber" top rating.



Mr Darroch today said the group did not reveal its performance targets, but added it had not paid on bonuses at the full rate possible in recent years despite "strong operational performances".

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